The new supermarket group will have combined revenues of £51 billion and will aim to generate £500 million in cost savings.

David Tyler, Sainsbury's chairman, said: "We believe that the combination of Sainsbury's and Asda will create substantial value for our shareholders and will be excellent news for our customers and our colleagues.

"As one of the largest employers in the country, the combined business will become an even greater contributor to the British economy.

"The proposal will bring together two of the most experienced and talented management teams in retail at a time when the industry is undergoing rapid change."

Speculation that the pair were considering a merger was confirmed by Sainsbury's over the weekend.

Following the tie-up, the two grocers will continue to have their own chief executives, Sainsbury's under Mike Coupe and Asda under Roger Burnley.

Mr Coupe said: "This is a transformational opportunity to create a new force in UK retail, which will be more competitive and give customers more of what they want now and in the future.

"It will create a business that is more dynamic, more adaptable, more resilient and an even bigger contributor to the UK economy.

"Having worked at Asda before Sainsbury's, I understand the culture and the businesses well and believe they are the best possible fit.

"This creates a great deal for customers, colleagues, suppliers and shareholders and I am excited about the opportunities ahead and what we can achieve together."

Unions have raised fears over the prospects for jobs, although Sainsbury's said that the deal will "offer more opportunities" for over 330,000 colleagues at all levels.

Unite has called for "guarantees" and wants meetings with senior bosses at both Sainsbury's and Asda.

Liberal Democrat leader Sir Vince Cable, the former business secretary, and shadow business ecretary Rebecca Long-Bailey both said the CMA "must investigate" any deal.

Sir Vince said the CMA should force the companies to sell off stores if the merger meant the new giant was dominant in a particular area, telling the watchdog's new chief, Andrew Tyrie, to "get tough with monopolies".

Ms Bailey warned that, in the absence of proper vetting, it would be "British shoppers that suffer from rising prices and British workers that may be fearing for their jobs".

Separately, Sainsbury's revealed that its full year pre-tax profit fell 19% to £409 million. Like for like sales grew 1.3% and the group delivered £185 million in cost savings, driven by cost savings linked to its integration of Argos.

Asda, meanwhile, saw its fourth consecutive quarter of positive like-for-like sales growth in the three months to March 31.

In the financial year to December 2017, Asda saw a 2.6% in sales to around £22.2 billion and a return to positive comparable sales for the full year.

However, investments in price dragged down operating profit to £720 million from £845 million.

This would not be the first time Sainsbury's has acquired another high street giant. In April 2016, they announced a £1.4 billion takeover of Argos, which led to better than expected results the following Christmas.

The traditional high street has come under increasing pressure in recent years, with the growth in online retailers.

Sainsbury's and Asda have also been squeezed by the rise of lower-cost supermarkets Aldi and Lidl, who between them have a 12.6% grocery market share in the UK.